30 March 2010

CCP v Google – the Chinese pick up Maslow’s hammer.

You could think a lot about why Google closed down its chinese search engine.

Was it the cyber attacks on Google suspected to be orchestrated by Beijing? Was it the inherent conflict between “Don’t be evil” and complicity in Chinese Communist Party censorship? Or could Google simply not compete against Baidu in the battle for chinese search engine share?

Your humble writer doesn’t know. However, its hard to get away from the fact that Google spat the dummy over ‘net censorship and the CCP were happy to show them the door if they weren’t going to play ball.

The CCP is obsessed with controlling the ‘net and, as Colonel Klink would say “they have ways of making you talk” (or not talk). There are currently more than 30,000 civil servants dedicated to censorship activities and an unknown number of secret police and other personnel devoted to intimidating dissidents and enforcing the party’s ‘net edicts.

I can’t help wondering if the CCP is a victim of Maslow’s hammer, trying to use traditional strong arm tactics to control something as fluid as the ‘net. Could the CCP stand to learn a thing or two from the US Republicans?

On paper the Republicans platforms are unelectable.

They favour tax cuts for the wealthiest 10% of the population, are against health insurance for 32 million citizens and went to war on a mistake (at best).

If US citizens voted their interests, there wouldn’t be a Republican party.

However, far from disappearing, the Republicans are surging back and may well be at least competitive in the November mid terms. And they are surging back in the poorest states in the Union.

How? In my view, an important factor is their appeal to emotion rather than reasons.

For instance, they don’t argue that a well funded public healthcare system is more expensive, they instead say its goddamned communism.

They don’t argue that tax cuts disproportionally favour the rich, they argue its about freedom of the working class.

They are also not afraid to try an old blood libel as in “the other side kill babies”.

The keys are: clear and emotive lines; party discipline to stay on message; and maybe a little help from a friendly media empire. All things the CCP should have in abundance.

If the Republicans can do it in the US with all the freedoms the Democrats and other opponents enjoy, surely the CCP can do it in China without the heavy stick of censorship?

I’m not a citizen of China, but from what I have seen, they are as patriotic and nationalistic as their US counterparts. I think CCP would have more success in appealing to those tendencies to create the myth of Chinese exceptionalism than to rely on secret police and an army of censors.

However, the CCP is fairly comfortable with the use of force to quell dissent, it would take a conceptual leap to rely exclusively on more subtle methods. As Mr Maslow said “If you have a hammer, everything begins to look like a nail”.

24 March 2010

Riding a dragon without a parachute

Australians generally refer to the Great Financial Crisis as “that thing that’s happening to other countries”.

Much of our smugness is based on our tidy relationship with China. In essence, we dig up raw materials and sell them to the Chinese. Forget clever, forget hard working, forget innovation – we export dirt.

What’s that worth to us? Exports to China in iron ore and coal alone were worth more than $25 billion last year. Our next biggest export – wool, was worth a lousy billion.

In addition, our other two biggest buyers, Japan and South Korea, buy over $40 billion in minerals, but sell a hell of a lot of their finished goods to China. You start to see how much we depend on the Chinese.

So, how far can we ride the dragon?

To predict that, you have to answer two underlying questions: What is China doing with all that ore and coal? And how are they paying for it?

The second question is easy: The Chinese have the world’s largest reserves of US debt, some $755 billion. Since the GFC hit, their government pumped in $586 billion in stimulus spending, keeping their economic growth at a healthy 10% by the end of 2009.

As to where its all going, they seem to be building real estate and making exports for the US.

And that’s where I started getting scared.

China’s property market is not just booming, its exploding. Prices are rising by 20% a year in major cities. It doesn’t take a long memory to recall other economies that were going though a boom like that (big hello to the US, Ireland and especially Dubai).

On its face this sort of growth seems unsustainable and fueled by pure speculation, but people keep piling in.

Their other big and continuing push is exports to the US. In the year to February, the Chinese managed to lift exports by 46% with the US still the number one market.

WTF? The US currently has 20% under employment and 25% of their houses are under water. So where the hell are they getting the coin to buy $25 billion in Chinese imports a month?

I suspect the answer is yet more debt for a country that already has $13.5 trillion in household debt.

So the question that should be keeping every Aussie up at night: What happens if the Chinese real estate bubble bursts or the USA can’t afford any more Chinese widgets?

Pull up a chair….I suspect we’re going to find out soon.

19 March 2010

Public choice theory in small stressed economies... or: Iceland to Britain "Get a frozen cod up ya!"

Drifting west again, three European economies have grabbed the headlines for the same bad reason – they are broke. Each enjoyed massive booms during the heady days of the last decade and each economy came crashing down in the wake of the GFC. However the different ways they are responding to the issue of private banks racking up huge bad debt is instructive of the level of capture of their respective governments by the banking sector.

The responses of Ireland, Latvia and Iceland are interesting case studies in public choice theory.

Case one: The Irish. Long time cannon fodder of the British Empire, the Irish can be expected to take one for the team pretty much on demand. True to form, they have nationalised private bank debt, firstly by guaranteeing those debts and now with the issue of government bonds for near worthless toxic assets.

To pay for this, they have crushed their public sector salaries, raised taxes and slashed benefits including €760 million from social-welfare programs. The plan is destroying the average Irish citizen, however its winning praise from the financial world for its prudence.

Case two: Latvia. The Latvian government, perhaps just so grateful to be out from under the Soviet thumb, implemented harsh austerity measures following the collapse of the Latvian property bubble. Teachers’ pay was cut by a third, taxes raised and public services cut so drastically that they couldn’t even clear snow from the streets in Riga in the middle of winter. These measures sent 26% of the population into poverty.

But the good news is that Lativa might pay off its foreign creditors 100 cents on the dollar, so happy days...right?

However, just maybe, the Latvians are not as captured as the Irish. Yesterday a major partner of the ruling coalition walked out over the next round of tax increases, at least delaying if not preventing further austerity measures.

The sudden development of a spine in some members of the Latvian parliament might have something to do with the work a group of naughty techies who hacked the tax records of some of the most wealthy in the country and released them on Twitter.

Seems that the average worker finds it hard to understand why they take a cut when the bosses get bonuses.

Case three: Iceland. The Icelanders have a long and proud tradition of telling major countries like the UK where they can shove it. Back in the 70s they sent their tiny navy out to defend their fishing zones from the British and successfully stared down the Royal Navy. So it really came as no surprise that Nordics have shown the least interest in destroying their economy to save foreign creditors of private banks.

A polite enquiry from the UK and Dutch governments as to whether the good people of Iceland would cough up €3.8 billion to cover investor losses in those countries following the collapse of their Icesave accounts was met with and equally polite rejection by 93.5 per cent of voters in a referendum last Saturday.

Now I’m not saying that the Icelanders will get away with thumbing their noses at the Brits and Dutch; the IMF is holding a gun to the Icelanders’ heads by threatening to exclude them from global credit markets if a deal can’t be done. However, the very fact that they haven’t just rolled over like a beaten dog, shows some courage on the part of the Icers.

Its my contention that Ireland’s government has been effectively captured by the banking sector to the point where the ordinary citizens must pay for the excesses of the banks. Latvia’s government was well on the way to capture until an intervening hacker revealed the inequity of the bail out. The Icelanders, on the other hand, put it to the people and the people said “No thanks, generally we get chocolates and flowers before we let people do that to us”.

Lets hope the people of Iceland can hold out, at least for a nice meal and a movie...

15 March 2010

Class warfare is the new black

Ok, so Greeks seem to get fairness, but everyone knows the leaders of "old Europe" are soft. You want to see the fight ramped up, you need to go to Asia baby.

The boys and girls in Thailand are leading the way with a little street protest.

The leaders of the Bangkok street party have also given a name to the public outrage at the fat bastards on top taking all the pie – class warfare.

People tell me class warfare, like the rest of Marx, is so ancient history. But, in my view, its the comeback kid of economic theories for the second decade of the 21st century.

Whether or not you think Thaksin Shinawatra is a corrupt bastard with a bit of a thing in respect of public telephone companies, you have to concede:

1. He was the author of massive land and social welfare reforms which put more Thai Bhats in the back pocket of the poorest in the country; and

2.The ruling party is so concerned about wealth accidently flowing down to the poor, they want to abandon democracy, because the little bastards keep voting in the wrong guys.

I’m pleased that, at least in Thailand, the social/economic combatants can take off the masks and have an honest fight.

Its really the same fight they are having in the US between the “conservatives” and “liberals”. Only difference is that over in the US they insist on dressing it up in silly patriotic fantasies.

In the US, you can’t just say “screw the poor”, you have to talk about “Real American Values”.

You get to the same position - “I’m buggered if I’m helping anyone” - but the route is meandering and throws up some rather bizarre characters.

Frankly, I prefer the Thai approach.

14 March 2010

Rock throwing probably also saves babies

An interesting follow up on my last post.

The Guardian reports that a US woman is five times more likely to die in childbirth than a woman in Greece.

I don't think anyone is seriously suggesting that Greek doctors are the bomb when it comes to medical services...so why?

The clue is that the deaths are coming in the black and native American populations, not among affluent whites.

Forget arguments about public health and about insurance. In my view it comes down to disempowerment. Mothers die because there are no consequences for those who let them die.

In Greece or France statistics like these would cause a riot. Hell, our cousins in New Zealand would be out in the street if they had childbirth mortality rates of a third world country.

But the US people take it without comment.

Anger and retaliation are what drives fairness, not hand wringing and talk.

I hope that if Australians had a government that would allow such skewed medical support, we would vent our anger.

10 March 2010

Greeks, monkeys and the value of a good fist sized rock

I see in response to proposed austerity measure designed to cut conditions and services to the low and middle class and save the Greek economy, the good folk of Athens have got a little het up.

On the flip side, our cousins in the US haven’t got their riot faces on at home since about the time four police offices helped a confused Mr King relax on the road in 1992.

Interestingly the divide between rich and poor is much wider in the US than Greece and getting worse.

I think the two issues are connected and it comes down to why we treat others fairly.

The concepts of equity and co-operation seem hard coded into our DNA. They were evolved so early on they are shared by apes and even monkeys.

Even a relatively primitive monkey like the capuchin understands that if its doing the same work (collecting rocks) it deserves the same payout in terms of food. If monkey A is getting nothing but cucumber slices for his rock collecting while monkey B is getting juicy grapes, A feels entitled to throw a tantrum.

More evolved apes like the bonobo can take the game to another level. Not only does the ape getting shafted feel resentment, the ape getting the sweet deal becomes agitated about the inequity and demands justice for all.

In my view, what the guys conducting the study might have overlooked is that fairness only works where the screwed over party gets a shot at retaliation.

I’m pretty sure the other apes were looking at the one getting the food and muttering “So Mrs Bonobo, I see you are getting all the milk and raisins. Well wait until the research scientists are gone. Then we’ll have a group meeting to air our grievances about the fairness issues. My representative, Mr Fists, will be attending”.

Clever Mrs Bonobo knew to play fair and avoid the discussion that would surely follow.

However, if the screwed over party doesn’t have the power to retaliate, fairness goes out the window.

The Mongols, sitting atop their war ponies with their powerful recurve bows, scarcely wondered about the equity of the situation as they were busy piling up the heads of their adversaries. Why should they? The opposition wasn’t in a position to deliver even a forcefully worded letter of demand about the burning, looting and head piling activities.

Same same with modern transactions:

“The banks sold us some weird derivative products that seem to have bankrupted the national economy. We kinda need to close schools and cut pensions. All for the best you understand?”; or

“Hmmm, can’t pay off the loan I see…well I guess we’re going to have to sell your family farm to the large agro business down the road. Nothing personal just business”; or

“So…worked here for 25 years. Sadly we’ll we need to cut you wages to ensure a bit of a bonus for the execs this year. Nothing personal you understand?”

To my mind, retaliation and revenge are as much a part of a fair society as trust and co-operation. Lose them and the party with the whip starts using it.

So go the Greek workers! If the powers that be really want to reduce the national debt by cutting benefits from the poor and middle class, there should at least be a few rocks through government windows and burning cars in the streets. It keeps the flame of fairness alive.

…I wonder what it would take for retrenched Americans to pick up a few nice fist sized rocks…

09 March 2010

Terrorism and the Availability Heuristic

I was thinking about the recent spat between Liberal Senator Simon Birmingham and the Minister for anything Penny Wong doesn’t want.

On the numbers, the Senator’s argument is water tight. There is no denying insulation killed more Australians than terrorism in the last 12 months.

In fact the last terrorist in Australia only managed to blow himself to hell. Before that you have to go back to the Hilton bombing in ’78.

So why does the PM get to launch into Birmingham like he just called cricket boring?

Why should we want to believe terrorism is more of a threat than dodgy pink batts?

It got me to reading the article on the Availability Heuristic referred to Stumbling and Mumbling.

The concepts are intuitively obvious - You believe something is more probably if you’ve personally experienced it. However, even if you have never experienced it yourself, if you hear about something happening all the time, you believe it is likely and common.

It seems likely, at least to me, that we evolved this way of thinking as primitive people where our news arrived from our own five senses and whatever we heard from our immediate family and neighbours.

So, sure, if you had personally been wandering in the valley to the north and got attacked by wolves, you damn well knew it was dangerous.

But, if three people told you that they each knew a bloke who got eaten by wolves in the valley just north of you, you tended to accept that that place was dangerous despite your lack of first hand evidence.

Those who just had to go see for themselves tended to have an abridged chance to pass on that non-survivor trait (but at least the wolves got a meal).

However, it seems this response is gamed in a world where we receive our news from around the world and where that news is highly refined to seek out the most macabre and sensational.

Any news story on terrorism is covered extensively, and when there is not enough actual terrorism to fill up the day we can always turn to Jack Bauer or the team from NCIS to remind us of the ever present threat.

As we see terrorism reported all the time, I think we end up thinking such an event is common (and more importantly imminent) against the weight of evidence.

Our evolution allows the brain to bypass facts to reach the conclusion that we are under threat from terrorism. The fear is real, even if the reason for it is an illusion.

On the other hand, who had even heard of the risks of insulation installation before February?

Our brains are not saturated with reports of imminent electrocution.

Hence: “Fear of pink batts? What are you a poofter?”

So the PM can ignore the facts and call Birmingham an idiot relying on the voters to do the same.

Of course he’s not the first PM to play the terrorist card

Heuristic wins, facts lose and back to the TV.

In the footsteps of giants - the fallacy of initiative

My favourite blog is stumbling and mumbling (see link in the corner).

I highly recommend three of his lastest articles.

Cutting spending: the BBC warning

Tony Pulis: capitalist lackey; and

Media bullying and cognitive biases.

Each looks at an important issue of game theory and economics.

Media bullying, in particular, raises an issue close to my heart – the fallacy of initative.

I'm a war nerd (though not The War Nerd of Exiled fame (again see link)), with a tendancy to go for the bad guys.

I thought the Empire a lot cooler than the rebels and my favourite tank is the Panzer Mk V. In a breath taking leap of logic, I thought the Red Army a lot cooler than those pussies in NATO.

So I hate how the bad guys are always portrayed in popular culture. Marching stoically into the good guys well placed trap and getting slaughtered. I think it appeals to a generation that grew up playing Galaga.

In my view that’s not war, that’s war porn. Like beating up the fat kid at school and then bragging about what a big man you are.

It seems to me, this is a projection of the fallacy of initative, the mistaken idea that only one side (your side) comes up with clever ideas and the other side is merely reactive.

In real life it never works. Just go ask:

The Germans in 1942 “the Reds could never mount a mobile double encirclement at Stalingrad";

The IDF in 1973 “Egyptians pull off a combined arms operation across the Suez Canal? I don’t think that’s likely”;

The US in 2008 “Sure we’ll out source production to China, what’s the harm? Russians? Who cares what they think?
We’re the only super power now baby."

As a good friend once reminded me “we are measured by the enemies we fight”.

So are our enemies.

07 March 2010

It begins

Toying with the idea of starting a blog is a little like a child toying with a fire cracker and a letter box. The fact that you're thinking about it means the decision is already made, its just a matter of time as you justify to yourself that the price is worth paying.

In the end, its probably not, but you light the wick anyway.